Mortgage Insurance

A CONSENSUS legislative solution to one of the hottest consumer controversies of 1997 -- widespread overpayment of private mortgage insurance premiums by unsuspecting homeowners -- emerged on Capitol Hill last week.In a bipartisan vote, the House banking committee approved a bill that would force the mortgage lending industry nationwide to automatically cancel mortgage insurance policies whenever a borrower's equity stake in the home reaches 25 percent. The equity level would be measured against the value of the home at the time the loan was closed.

The U.S. Department of Housing and Urban Development announced Monday that it is instituting a 90-day foreclosure moratorium on Federal Housing Administration-insured mortgages in Maryland areas hard hit by Hurricane Sandy. As part of President Obama's disaster declaration last week, the housing department is implementing foreclosure relief and other assistance for homeowners and low-income renters in 18 Maryland jurisdictions. “Families who may have been forced from their homes need to know that help is available to begin the rebuilding process,” HUD Secretary Shaun Donovan said in a statement.

IT IS ONE of the key trade-offs for anyone who wants to buy a house but doesn't have much for a down payment: The lender will OK your mortgage application, but only if you agree to pay private mortgage insurance (PMI) premiums every month. But those premiums - currently paid by an estimated 5 million American homeowners - can add $50 to $150 a month to your mortgage bills and continue for close to a decade. Now one player in the mortgage insurance industry has begun giving buyers the option of nailing down a precise date in advance for canceling premium payments.

Though the final operational guidelines of the Obama administration's foreclosure-avoidance programs won't be released until Wednesday, key details have begun surfacing on the refinancing opportunities that will be available to an estimated 4 million to 5 million homeowners whose mortgages are owned or guaranteed by Fannie Mae and Freddie Mac. Under the Obama plan, borrowers who have made their monthly payments on time but are saddled with interest rates...

Can you get rid of your mortgage insurance, and quit paying premiums every month? Probably so, if it's private insurance and you have enough equity in your home. But generally not, if you're insured by the Federal Housing Administration.Anyone with a conventional loan (not backed by the FHA or VA) would normally have purchased mortgage insurance if the down payment came to less than 20 percent. This insurance protects the lender. If the lender has to foreclose, and your house doesn't sell for enough to cover the outstanding loan, mortgage insurance makes up part or all of the difference.

IN A STRONG, pro-consumer move, the Bush administration has decided to allow automatic termination of mortgage insurance premiums for new customers using the nation's largest source of federal home loan money. The decision, not yet formally announced but scheduled for implementation this summer, effectively provides homebuyers under the Federal Housing Administration mortgage program equal treatment with borrowers in the conventional marketplace who pay private mortgage insurance premiums, known as PMI. Consumers who closed FHA mortgages from Jan. 1 onward now will be able to stop paying insurance premiums when their equity stakes reach 22 percent of the original sales price of the home.

ABIPARTISAN tax bill with the potential to cut monthly mortgage costs for millions of homeowners faces an uncertain future this summer. The measure, which passed the Senate in May as part of a larger omnibus tax bill, would allow many of the estimated 12 million-plus homeowners who pay mortgage insurance premiums to deduct them on their federal tax returns. An identical proposal in the House has attracted co-sponsorship of more than 200 Republicans and Democrats - almost a voting majority.

IF YOU'RE buying or refinancing a house, and putting less than 20 percent down, the bank requires you to buy mortgage insurance. This guarantees that the lender won't take a major loss if you default.But banks are getting more aggressive. They'd like to lay hands on the money you're paying to the insurer.So in place of mortgage insurance, many are offering something called a piggyback loan. You pay a higher interest rate on asmall part of the money you borrow. That higher rate helps offset the bank's losses from defaults.

WHILE MORTGAGE rates fell to near-record lows earlier this month, one large category of American homebuyers saw rates spike the other way. They were hit with substantial price increases on their mortgage rate quotes - but they may not have understood it at the time. Welcome to the arcane world of home mortgage "risk-based pricing," where your credit score is your destiny, and your credit files determine the interest rate you pay. What happened this month: Private mortgage insurance companies nationwide decided that certain borrowers with slightly-imperfect credit profiles - known in the trade as "A-minus" - represent a greater risk of default in today's economy than previously thought.

A seemingly arcane policy change by mortgage investor Freddie Mac sheds new light on issues of much broader concern for consumers: Do you really understand where the money is flowing -- all the nooks and crannies -- when you take out a mortgage and pay thousands of dollars in fees at settlement? Is anyone required to explain to you what's really going on inside your home loan -- how it works and whether it could morph into something very different? And could any of this improve soon? Freddie Mac's Feb. 14 policy change affected a dark corner of the mortgage business -- splits of mortgage insurance premiums between lenders and insurers.

If you bought a house in recent years without a big down payment or without a second mortgage, you're probably paying for private mortgage insurance every month. But you don't have to forever. You can qualify to cancel it if you've made enough payments, raised the value of your property with home improvements or (rarer and rarer nowadays) live in an area that is seeing strong gains in sales prices. One or more of those options can get your loan balance down to 80 percent of the value of the home when you got the loan, the magic number.

In a tax-Peter-to-pay-Paul move, the House Ways and Means Committee voted to permanently remove the so-called "phantom income" tax penalty that haunts financially distressed homeowners whose debt is partially forgiven by a lender after a foreclosure or a "short sale" to avoid foreclosure. The committee also voted to extend the deductibility of mortgage insurance premiums through 2014 - an important benefit for many borrowers who pay either private mortgage insurance or Federal Housing Administration premiums on their loans.

By Meredith Cohn and David Nitkin and Meredith Cohn and David Nitkin,Sun reporters | September 1, 2007

President Bush outlined steps yesterday designed to help homeowners who can no longer afford their mortgages, including broader access to federally backed mortgage insurance. But mortgage professionals and community activists were split on how far the government should go in providing assistance - and how many people should benefit from it. In his Rose Garden address yesterday, Bush took pains to note that his administration's proposal should not be considered a "bailout" of homeowners who recklessly extended themselves or mortgage lenders who peddled products that left their customers imperiled.

Home loan industry competitors are searching for hidden gimmicks, but Bank of America insists that its "No Fee Mortgage Plus" plan announced Tuesday delivers exactly what the name implies - without raising interest rates to applicants. The new program comes with none of the traditional mortgage and settlement charges - application fee, appraisal fee, credit, underwriting, processing, title insurance, title search, private mortgage insurance, flood certification or closing fees, among others - and offers "competitive" interest rates.

You have a lot on your plate making sure you get your tax return in on time. But it's not too early to start thinking about trimming your 2007 tax bill. One usual strategy is to contribute to tax-friendly retirement accounts. Thanks to changes this year, more people will be eligible for individual retirement accounts. But some tax breaks are around only for this year, and you can lose out if you don't act in the coming months. For example, a tax credit for making energy-saving improvements to your home expires at year-end.

Wall Street is sounding the alarm on one of the most popular ways to buy a house in many high-cost areas around the country - so-called "piggyback" programs that mesh simultaneously closed first-lien mortgages and second-lien credit lines or mortgages. As of July 1, the most influential ratings agency in the mortgage arena, Standard & Poor's Corp., has upped the ante for lenders who seek to fund piggyback deals through capital market financings. The move is likely to raise interest rates and fees for some homebuyers this summer, mortgage experts say, and could reduce the volume and availability of piggyback programs overall.

For more than 70 years, the Federal Housing Administration and its programs have been a very important means of extending mortgage financing to low- and moderate-income and minority families. Today, it continues to be a vital part of the national effort to increase and expand homeownership to these populations. When the FHA was created in 1934, the housing industry was facing dire straits: Millions of construction workers had lost their jobs, down-payment requirements were upward of 50 percent, and America was primarily a nation of renters.